(Adds comments from CEO, background) SYDNEY, July 25 (Reuters)...

(Adds comments from CEO, background)

SYDNEY, July 25 (Reuters) - Woolworths Ltd (WOW), Australia's top grocer, on Monday said it will book costs of up to A$1 billion ($746 million), close stores, axe 500 jobs and consider selling online retailer Ezibuy in a restructuring aimed at regaining its competitive edge.

The overhaul comes after Woolworths posted its first loss in 23 years in February amid increasing competition from foreign entrants including German discount chain Aldi [ALDIEI.UL].

"This will be a three- to five-year journey," Woolworths Chief Executive Officer Brad Banducci said, adding the company had to make some "tough decisions".

The 500 jobs being cut were back office roles and another 1,000 positions would be shifted from head office in Sydney into stores, the company said.

Three underperforming stores had already been closed this year and there were plans to shut another 30 across Australia and New Zealand, it added. It would also close five Big W hardware stores.

Online retailer Ezibuy would be separated from discount department store Big W as part of the restructure, and the company said it was "exploring options" for the sale of Ezibuy.

Ezibuy was expected to report a loss in the year to June 2016 of A$13 million to 18 million and Big W a loss of A$12 million to 17 million, the company said.

Woolworths' earnings before interest and tax from continuing operations, before significant items, would be between A$2.55 billion and A$2.57 billion in 2016, Banducci said.

The company reported a first-half loss of A$972.7 million which included a A$3.2 billion write-off on its Masters hardware chain.

The restructure would "rebuild the business" and reinforce front-line roles to boost customer service, said Banducci, who was appointed CEO in February.

He previously headed Woolworths' supermarkets division, where he also led a restructure aimed at recouping market share lost in a price war to main rival Coles, owned by Wesfarmers Ltd (WES).

($1 = 1.3394 Australian dollars)